UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

August 12, 2021 (August 10, 2021)

Date of Report (date of earliest event reported)

 

 

UpHealth, Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   001-38924   83-3838045

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

14000 S. Military Trail, Suite 203

Delray Beach, FL 33484

(Address of principal executive offices)

(312) 618-1322

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbols

 

Name of each exchange

on which registered

Common Stock, par value $0.0001 per share   UPH   New York Stock Exchange
Redeemable Warrants, exercisable for one share of Common Stock at an exercise price of $11.50 per share   UPH.WS   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

Item 1.01.

Entry into a Material Definitive Agreement.

Amendment to Forward Share Purchase Agreement with KAF

As previously reported in a Current Report on Form 8-K filed by UpHealth, Inc. (f/k/a GigCapital2, Inc. and referred to herein as the “Company”) with the Securities and Exchange Commission (the “SEC”) on June 4, 2021 (the “Agreement Current Report”), the Company entered into a Forward Share Purchase Agreement, dated as of June 3, 2021 (the “Forward Share Purchase Agreement”), with Kepos Alpha Master Fund L.P., a Cayman Islands limited partnership (“KAF”). The Forward Share Purchase Agreement provides, among other things, that KAF may elect to sell and transfer to the Company, and the Company will purchase from KAF, on September 8, 2021 or, in KAF’s sole discretion, any one calendar month anniversary of that date (the “Closing Date”), up to 1,700,000 shares of the Company’s common stock that are held by KAF (such shares of common stock, the “KAF Shares”) at the closing of the Company’s business combinations with UpHealth Holdings, Inc., a Delaware corporation, and with Cloudbreak Health, LLC, a Delaware limited liability company.

On August 10, 2021, the Company entered into the Amendment to the Forward Share Purchase (the “First Amendment”). The First Amendment provides that the per share price at which KAF has the right to sell the KAF Shares to the Company is (a) $10.30225 per KAF Share, plus (b) in the event that the Closing Date occurs after September 8, 2021, $0.0846 per KAF Share for each month (prorated for a partial month) following September 8, 2021. The First Amendment further provides that KAF irrevocably commits to defer the Closing Date to no earlier than January 9, 2022, provided that if (x) the Company issues any new securities, whether an existing or new class, or (y) an event occurs having a material adverse effect on the Company’s management or operations, KAF shall have the right to designate a Closing Date following such issuance or occurrence upon three business days’ notice to the Company.

The foregoing description is only a summary of the First Amendment, and is qualified in its entirety by reference to the full text of the First Amendment, which is filed as Exhibit 10.1 hereto, and is incorporated herein by reference. The First Amendment is included as an exhibit to this Current Report in order to provide investors and security holders with material information regarding its terms. The First Amendment is not intended to provide any other factual information about or the Company or KAF.

 

Item 2.02

Results of Operations and Financial Condition.

On August 12, 2021, the Company issued a press release announcing its financial results for the quarter ended June 30, 2021. A copy of the Company’s press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed “filed” with the SEC nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended (the “Securities Act”).

 

Item 7.01

Regulation FD Disclosure

The Company will host a conference call to discuss its second quarter 2021 financial results on August 12, 2021, at 5:00 p.m. Eastern time.

The information contained in, or incorporated into, this Item 7.01 of this Current Report, is furnished under Item 7.01 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act regardless of any general incorporation language in such filings.

This Current Report shall not be deemed an admission as to the materiality of any information in this Current Report that is being disclosed pursuant to Regulation FD.

Please refer to Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits:

 

Exhibit No.    Item
10.1    Amendment to Forward Share Purchase Agreement dated August 10, 2021, by and between UpHealth, Inc. and Kepos Alpha Master Fund L.P.
99.1    Press Release, dated August 12, 2021, reporting financial results for the quarter ended June 30, 2021 (furnished only)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 12, 2021

 

By:   /s/ Ramesh Balakrishnan
Name:   Dr. Ramesh Balakrishnan
Title:   Chief Executive Officer

Exhibit 10.1

AMENDMENT TO

FORWARD SHARE PURCHASE AGREEMENT

Dated August 10, 2021

This letter agreement (the “Amendment”) amends the Forward Share Purchase Agreement dated June 3, 2021 (the “FPA”), by and among GigCapital2, Inc., a Delaware corporation (the “Company”), and Kepos Alpha Master Fund L.P., a Cayman Islands limited partnership (“KAF”). The terms not defined herein shall have the meaning assigned to them in the FPA.

WHAREAS, the parties hereto wish to amend the FPA as provided herein.

NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

  1.

Section l(a) of the FPA is hereby replaced in its entirety by the following:

 

  a.

Forward Share Purchase. Subject to the conditions set forth in Section 4, KAF shall sell and transfer to the Company, and the Company shall purchase from KAF, up to 1,700,000 Shares that are held by KAF at the closing of the Business Combinations at a per Share price (the “Shares Purchase Price”) equal to (a) $10.30225 per Share, plus, (b) in the event that the Closing Date occurs after September 8, 2021, $0.0846 per Share for each month (prorated for a partial month) following September 8, 2021.

 

  2.

KAF irrevocably commits to defer the Closing Date to no earlier than January 9, 2022, provided, if(x) the Company issues any new equity securities, whether of existing or new classes, or (y) an event occurs having a material adverse effect on the Company’s management or operations, KAF shall have the right to designate a Closing Date following such issuance or occurrence9 on three (3) business days’ notice to the Company.

 

  3.

Except as explicitly modified hereby, all other terms and provisions of the FPA shall remain in effect.

 

  4.

This Amendment may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Delivery of a counterpart execution by electronically mailed scan shall constitute delivery of an executed counterpart.

[the rest of this page intentionally blank]

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first set forth above.

KAF:

Kepos Alpha Master Fund L.P.

By: Kepos Capital LP, its Investment Manager

 

By:  

/s/ Simon Raykher

Name:   Simon Raykher
Title:   General Counsel

COMPANY:

GigCapital2, Inc.

 

By:  

/s/ Raluca Dinu

Name:   Dr. Raluca Dinu
Title:   Executive Chairman of the Board,
President & CEO

UpHealth, Inc. (formerly known as GigCapital2, Inc.)

 

By:  

/s/ Martin Beck

Name:   Martin Beck
Title:   Chief Financial Officer

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

UPHEALTH ANNOUNCES SECOND QUARTER FISCAL 2021 FINANCIAL RESULTS

Second quarter GAAP revenue of $31.9 million

Pro forma revenue of $39.2 million, up 28% sequentially

Gross margin of 36.4%

Pro forma Adjusted EBITDA of $2.3 million

DELRAY BEACH, Florida – August 12, 2021 – UpHealth, Inc. (“UpHealth” or the “Company”) (NYSE: UPH), a global digital health company delivering technology platforms, infrastructure, and services to modernize care delivery and health management, today announced financial results for the second quarter ended June 30, 2021.

“The second quarter was an exciting one for us, being our first quarter as a public company after successful completion of combination with the GigCapital2, Inc.,” said Dr. Ramesh Balakrishnan, Chief Executive Officer at UpHealth. “We were very pleased with our performance; we exceeded revenue estimates and met our targets for adjusted EBITDA. We completed business combinations, and made good progress with integration across our business units to launch UpHealth as a unified healthcare platform with a unique and comprehensive suite of technologies, infrastructure, and services. With this foundation in place, we are well-positioned to deliver innovative solutions across the care continuum for healthcare providers, health plans, counties, and governments to modernize healthcare globally. We create digitally enabled and connected care communities that address the whole person needs of individuals in a coordinated, collaborative, and integrated manner. These communities enable new models of care that reshape healthcare as it should be with dramatically improved access, quality, costs, and outcomes. Our goal is to deploy and connect these communities worldwide, and we have great opportunities for long-term and sustained growth.”

All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted. Due to the timing of the business combinations, there are no comparable operating results for the second quarter of 2020.                

Second Quarter 2021 Results (GAAP)

Revenues for the second quarter were $31.9 million with a gross margin of 36.4%. GAAP results reflect operations of the Company’s segments for the period after completion of mergers and acquisitions:

 

  •  

Integrated Care Management, the largest segment, generated $11.3 million of revenues (or 35% of total revenues) for the full three-month period of the quarter, with a gross margin of 40.9%;

  •  

Global Telehealth generated $7.0 million of revenues (or 22% of total revenues) for a partial period, with a gross margin of 37.8%;

 

  •  

Behavioral Health generated $8.3 million of revenues (or 26% of total revenues) for the full three-month period of the quarter, with gross margin of 28.4; and

 

  •  

Digital Pharmacy generated $5.3 million of revenues (or 17% of total revenues) for the partial period, with a gross margin of 37.4%.

Due to the timing of the various business combinations, there are no Q2 2020 GAAP revenues for UpHealth for comparison.

Second quarter net loss, which includes one-time acquisition-related expenses of $32.6 million, was $32.8 million.

Adjusted EBITDA for the second quarter was $2.1 million.

Second Quarter 2021 Results (Pro Forma)

On a pro forma basis, revenues for the second quarter were $39.2 million, an increase of 28% over pro forma revenues for the first quarter of 2021, with a gross margin of 36.4%.

Pro forma results report on operations of the segments for the full three-months of the quarter, assuming that mergers and acquisitions were completed prior to the beginning of the quarter:

 

  •  

Integrated Care Management was not affected by pro forma adjustments, and generated $11.3 million of revenue (or 29% of total pro forma revenues for the quarter), with a gross margin of 40.9%;

 

  •  

Global Telehealth was the largest segment and generated $12.4 million of pro forma revenues (or 32% of total pro forma revenues for the quarter), with a gross margin of 36.7%;

 

  •  

Behavioral Health was also not affected by pro forma adjustments, and generated $8.3 million of revenues (or 21% of total pro formal revenues for the quarter), with a gross margin of 28.4%; and

 

  •  

Digital Pharmacy generated $7.2 million of pro forma revenues (or 18% of total pro forma revenues for the quarter), with a gross margin of 38.0%.

UpHealth’s pro forma gross margin was 36.4% in the second quarter and was impacted by product mix in Integrated Care Management with the extension of a contract that the Company anticipates will generate rising margins over time.

Pro forma Adjusted EBITDA was $2.3 million.

Please refer to the discussion and tables below under “Non-GAAP Financial Information”.

Balance Sheet and Cash Flow

At June 30, 2021, UpHealth had total assets of $898 million, including $99 million of cash, cash equivalents, and restricted cash, and total debt of $208 million. During the first six months of 2021, cash used in operating activities was $37 million, largely due to the net loss of $36 million (which includes one-time acquisition-related expenses of $35 million), while investing activities provided $4 million of cash, primarily driven by net cash acquired in acquisition of businesses.

Key Business Highlights

 

  •  

The number of lives on UpHealth’s Integrated Care Management platform grew to 6.8 million, with 132 organizations participating in connected, digitally enabled care communities. The platform will support the largest publicly operated health plan to deploy new models of care that are part of California’s CalAIM initiative;

 

  •  

UpHealth extended use of its Integrated Care Management platform with a partnership in the European Union to modernize public health infrastructure with a first phase focused on Covid-19 tests, vaccines, analytics, and alerts to support reopening of travel and business;

 

  •  

Utilization of UpHealth’s telehealth platform in the US increased from 8.0 million minutes in the first half of 2020 to 11.4 million minutes in the first half of 2021, a growth of 42.5%. The platform is now deployed in over 2,000 healthcare venues in the United States;

 

  •  

The population served by digital clinics internationally increased from 4.5 million in Q2 of 2020 to 15.5 million in Q2 of 2021, a growth of over 240%; and

 

  •  

UpHealth introduced a revolutionary new digital hospital in the international market to extend the capabilities of its digital clinics. The first of these hospitals will be deployed in the second half of the year.

Financial Outlook

The Company will continue to accelerate growth in the second half of the year with the deployment of additional capital to meet increasing demand, and is on track to meet its 2021 pro forma financial projections.

Conference Call

Management will host a conference call to discuss the Company’s second quarter of 2021 results at 5:00 p.m. ET today, August 12, 2021. The call can be accessed live over the telephone by dialing (844) 200-6205, passcode 213641, from the U.S. or international callers can dial (646) 904-5544, passcode 213641. There will also be a simultaneous, live webcast available on the Investor Relations section of the Company’s web site at https://investors.uphealthinc.com/events-and-presentations/default.aspx or directly here. The webcast will be archived for approximately 30 days.

About UpHealth Inc.

UpHealth is a global digital health company with operations in over ten countries. UpHealth delivers digital-first technology, infrastructure, and services to dramatically improve how we deliver care and manage health for individuals and populations. The Company’s clients include governments, health plans, healthcare providers, and community-based organizations. UpHealth enables its clients to improve access, enhance quality, and achieve better outcomes more cost effectively with digital health infrastructure, interoperability tools, advanced analytics and coordinated workflows, connecting, and expanding the care continuum to create digitally enabled care communities serving patients wherever they are, whenever they need it, and in any language they speak.

Join us in the dialogue to improve healthcare at the #HealthcareReshaped hashtag on Twitter, LinkedIn, Facebook and Instagram.

For more information on UpHealth, please visit https://uphealthinc.com and follow us at @UphealthInc on Twitter, @uphealth-inc on LinkedIn and @uphealthinc on Instagram.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding product offerings of UpHealth, reception of its product by customers, and its expectations, hopes, beliefs, intentions, plans, prospects or strategies regarding the future revenues and the business plans of its management team. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this press release are based on certain assumptions and analyses made by the management of UpHealth in light of their respective experience and perception of historical trends, current conditions, and expected future developments and their potential effects on UpHealth as well as other factors they believe are appropriate in the circumstances. There can be no assurance that future developments affecting UpHealth will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the parties), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the mix of services utilized by UpHealth’s customers and such customers’ needs for these services, market acceptance of new service offerings, the ability of UpHealth to expand what it does for existing customers as well as to add new customers, that UpHealth will have sufficient capital to operate as anticipated, and the impact that the novel coronavirus and the illness, Covid-19, that it causes, as well as government responses to deal with the spread of this virus and the reopening of economies that have been closed as part of these responses, may have on UpHealth’s operations, the demand for UpHealth’s products, global supply chains and economic activity in general. Should one or more of these risks or uncertainties materialize or should any of the assumptions being made prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

Reed Anderson

ICR

646-277-1260

reed.anderson@icrinc.com

Source: UpHealth, Inc.

UPHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts, unaudited)

 

     June 30, 2021     December 31, 2021  
ASSETS  

Current Assets:

    

Cash and cash equivalents

   $ 98,116     $ 1,839  

Restricted cash

     586       531  

Accounts receivable, net

     40,636       6,703  

Inventories

     3,208       117  

Due from related parties

     13       —    

Prepaid expenses and other current assets

     7,060       3,501  
  

 

 

   

 

 

 

Total current assets

     149,619       12,691  
  

 

 

   

 

 

 

Property and equipment, net

     55,154       151  

Intangible assets, net

     123,463       27,782  

Goodwill

     567,952       164,194  

Equity method investments

     —         57,214  

Deferred tax assets

     —         335  

Other assets

     1,865       23  
  

 

 

   

 

 

 

Total assets

   $ 898,053     $ 262,390  
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY  

Current Liabilities:

    

Accounts payable

   $ 8,232     $ 2,680  

Accrued expenses

     33,764       8,482  

Deferred revenue

     6,572       397  

Due to related party

     57       70  

Income taxes payable

     902       673  

Related-party long-term debt, current

     670       39  

Long-term debt, current

     49,487       22,531  

Derivative liability, current

     38,598       —    

Forward share purchase liability

     17,123       —    

Other current liabilities

     1,048       —    
  

 

 

   

 

 

 

Total current liabilities

     156,453       34,872  
  

 

 

   

 

 

 

Related-party long-term debt, noncurrent

     —         381  

Long-term debt, noncurrent

     96,131       345  

Deferred tax liabilities

     24,582       6,071  

Warrant liabilities, noncurrent

     772       —    

Derivative liability, noncurrent

     23,225       —    

Other long-term liabilities

     2,773       —    
  

 

 

   

 

 

 

Total liabilities

     303,936       41,669  
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Common stock

     12       1  

Additional paid-in capital

     620,455       222,907  

Accumulated deficit

     (37,920 )      (2,187 ) 

Accumulated other comprehensive loss

     (3,478 )      —    
  

 

 

   

 

 

 

Total UpHealth, Inc., stockholders’ equity

     579,069       220,721  
  

 

 

   

 

 

 

Noncontrolling interests

     15,048       —    
  

 

 

   

 

 

 

Total stockholders’ equity

     594,117       220,721  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 898,053     $ 262,390  
  

 

 

   

 

 

 

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

 

     Three Months Ended
June 30, 		    Six Months Ended
June 30, 		 
     2021     2020     2021     2021  

Revenue

        

Services

   $ 14,773     $ —       $ 22,911     $ —    

Licenses and subscriptions

     9,145       —         12,803       —    

Products

     7,964       —         8,984       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     31,882       —         44,698       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of goods and services

        

Services

     9,381       —         14,102       —    

License and subscriptions

     6,173       —         6,670       —    

Products

     4,727       —         5,644       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of goods and services

     20,281       —         26,416       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     11,601       —         18,282       —    

Operating expenses

        

Sales and marketing

     1,695       —         2,580       —    

Research and development

     872       —         2,630       —    

General and administrative

     8,974       336       12,254       539  

Depreciation and amortization

     2,966       —         3,870       —    

Acquisition-related expenses

     32,646       —         35,339       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     47,153       336       56,673       539  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (35,552 )      (336 )      (38,391 )      (539 ) 

Other income (expense)

        

Interest expense

     (4,870 )      —         (5,581 )      —    

Gain on consolidation of equity method investment

     —         —         640       —    

Gain on fair value of warrant liabilities

     1,074       —         1,074       —    

Gain on extinguishment of debt

     151       —         151       —    

Other expense, net, including interest income

     (258 )      —         (221 )      —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (3,903 )      —         (3,937 )      —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

     (39,455 )      (336 )      (42,328 )      (539 ) 

Income tax benefit

     6,647       —         7,053       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before loss from equity method investment

     (32,808 )      (336 )      (35,275 )      (539 ) 

Loss from equity method investment

     —         —         (561 )      —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (32,808 )      (336 )      (35,836 )      (539 ) 

Less: net loss attributable to noncontrolling interests

     (24 )      —         (102 )      —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to UpHealth, Inc.

   $ (32,784 )    $ (336 )    $ (35,734 )    $ (539 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to UpHealth, Inc.:

        

Basic

   $ (0.35 )    $ (0.01 )    $ (0.43 )    $ (0.01 ) 

Diluted

   $ (0.35 )    $ (0.01 )    $ (0.43 )    $ (0.01 ) 

Weighted average shares outstanding:

        

Basic

     94,170       50,050       83,585       50,050  

Diluted

     94,170       50,050       83,585       50,050  

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

     Six Months Ended June 30,  
     2021     2021  

Operating activities:

    

Net loss

   $ (35,836 )    $ (539 ) 

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     4,353       —    

Amortization of debt issuance costs and discount on convertible debt

     1,913       —    

Gain on extinguishment of debt

     (151 )      —    

Loss from equity method investment

     561       —    

Gain on consolidation of equity method investment

     (640 )      —    

Loss on fair value of warrant liabilities

     (1,074 )      —    

Loss on disposal of property and equipment

     78       —    

Deferred income taxes

     (7,262 )      —    

Other

     (271 )      —    

Changes in operating assets and liabilities, net of effects of acquisitions:

    

Accounts receivable

     (21,000 )      —    

Inventories

     (80 )      —    

Prepaid expenses and other current assets

     5       —    

Accounts payable and accrued expenses

     15,592       539  

Income taxes payable

     200       —    

Deferred revenue

     5,877       —    

Proceeds from Provider Relief Funds

     506    

Due to (from) related parties

     28    

Other current liabilities

     (27 )      —    
  

 

 

   

 

 

 

Net cash used in operating activities

     (37,228 )      —    
  

 

 

   

 

 

 

Investing activities:

    

Purchases of property and equipment

     (669 )      —    

Due to (from) related parties

     265       —    

Net cash acquired in acquisition of businesses

     4,263       —    
  

 

 

   

 

 

 

Net cash provided by investing activities

     3,859       —    
  

 

 

   

 

 

 

Financing activities:

    

Proceeds from merger and recapitalization transaction

     83,435       —    

Proceeds from convertible debt

     164,500       —    

Repayment of debt

     (17,333 )      —    

Payments of debt issuance costs

     (8,100 )      —    

Payments of seller notes

     (88,056 )      —    

Distribution of noncontrolling interests

     (100 )      —    

Payments of capital lease obligations

     (275 )      —    

Payments of amount due to member

     (4,270 )      —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     129,801       —    
  

 

 

   

 

 

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

     (99 )      —    
  

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

     96,333       —    

Cash, cash equivalents, and restricted cash, beginning of period

     2,369       —    
  

 

 

   

 

 

 

Cash, cash equivalents, and restricted cash, end of period

   $ 98,702     $ —    
  

 

 

   

 

 

 

Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement UpHealth’s condensed consolidated financial statements presented in accordance with GAAP, UpHealth presents investors with non-GAAP financial measures, including pro forma revenue, pro forma gross margin, and adjusted EBITDA.

 

  •  

Pro forma revenue consists of GAAP revenue and revenue from UpHealth’s subsidiaries prior to their acquisition.

 

  •  

Pro forma gross margin consists of GAAP gross margin and gross margin from UpHealth’s subsidiaries prior to their acquisition.

 

  •  

Adjusted EBITDA consists of net income (loss) attributable to UpHealth, Inc., excluding depreciation and amortization, acquisition-related costs, other income (expense), income tax benefit (expense), income (loss) from equity method investment, net income (loss) attributable to noncontrolling interests, and other non-recurring charges to GAAP net income (loss) attributable to UpHealth, Inc. Other non-recurring charges to GAAP net income (loss) attributable to UpHealth, Inc. may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments, the cumulative effect of a change in accounting principles, or other expenses determined to be non-recurring.

UpHealth believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to UpHealth’s financial condition and results of operations. Management believes that the items described above provide an additional measure of UpHealth’s operating results and facilitates comparisons of UpHealth’s core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present, and future operating performance and as a supplemental means to evaluate UpHealth’s ongoing operations. UpHealth believes that these non-GAAP financial measures are useful to investors in their assessment of UpHealth’s operating performance.

Pro forma revenue, pro forma gross margin and Adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. You should not consider these measures in isolation or as a substitute for analysis of UpHealth’s results as reported under GAAP. UpHealth compensates for these limitations by prominently disclosing GAAP financial measures and providing investors with reconciliations from UpHealth’s GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

UPHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)

(in thousands, unaudited)

 

     Three Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

Revenue

   $ 31,882     $ 7,290     $ 39,172  
     Three Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

Gross margin

     36.4 %      36.4 %      36.4 % 
     Three Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

GAAP net loss attributable to UpHealth, Inc.

   $ (32,784 )    $ (3,394 )    $ (36,178 ) 

Net loss attributable to noncontrolling interests

     (24 )      6       (18 ) 
  

 

 

   

 

 

   

 

 

 

GAAP net loss

     (32,808 )      (3,388 )      (36,196 ) 

Other expense

     3,903       (1,180 )      2,723  

Income tax benefit

     (6,647 )      —         (6,647 ) 

Loss from equity method investment

     —         —         —    
  

 

 

   

 

 

   

 

 

 

GAAP loss from operations

     (35,552 )      (4,568 )      (40,120 ) 

Depreciation and amortization

     3,570       892       4,462  

Acquisition-related and non-recurring expenses (4)

     34,086       3,895       37,981  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 2,104     $ 219     $ 2,323  
  

 

 

   

 

 

   

 

 

 
     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

Revenue

   $ 44,698     $ 25,082     $ 69,780  
     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

Gross margin

     40.9 %      36.9 %      39.5 % 
     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)  

GAAP net loss attributable to UpHealth, Inc.

   $ (35,735 )    $ (4,317 )    $ (40,052 ) 

Net loss attributable to noncontrolling interests

     (102 )      28       (74 ) 
  

 

 

   

 

 

   

 

 

 

GAAP net loss

     (35,837 )      (4,289 )      (40,126 ) 

Other expense

     3,937       (1,171 )      2,766  

Income tax benefit

     (7,053 )      (99 )      (7,152 ) 

Loss from equity method investment

     561       —         561  
  

 

 

   

 

 

   

 

 

 

GAAP loss from operations

     (38,392 )      (5,559 )      (43,951 ) 

Depreciation and amortization

     4,498       2,729       7,227  

Acquisition-related and non-recurring expenses (4)

     36,780       5,302       42,082  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 2,886     $ 2,472     $ 5,358  
  

 

 

   

 

 

   

 

 

 

 

(1)

See Non-GAAP Financial Information section for definitions of our non-GAAP financial measures.

(2)

Amounts reflect operating activity of UpHealth and subsidiaries during the period prior to each subsidiary’s’ acquisition date, if acquired during the period.

(3)

Amounts reflect operating activity of UpHealth and subsidiaries during the period, as if acquired at the beginning of the period.

(4)

Acquisition-related and non-recurring expenses consist of acquisition-related expenses from the condensed consolidated statements of operations, as well as other operating expenses considered to be non-recurring during the period.

UPHEALTH, INC.

SEGMENT INFORMATION AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)

(in thousands, unaudited)

 

     Three Months Ended June 30, 2021     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)     GAAP     Adjustments (2)     Pro Forma (3)  

Revenue:

            

Integrated care management (4)

   $ 11,280     $ —       $ 11,280     $ 17,570     $ —       $ 17,570  

Global telehealth (5)

   $ 6,964     $ 5,394     $ 12,358     $ 7,554     $ 15,603     $ 23,157  

Digital pharmacy (6)

   $ 5,299     $ 1,896     $ 7,195     $ 5,299     $ 8,920     $ 14,219  

Behavioral health (7)

   $ 8,339     $ —       $ 8,339     $ 14,275     $ 559     $ 14,834  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 31,882     $ 7,290     $ 39,172     $ 44,698     $ 25,082     $ 69,780  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended June 30, 2021     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)     GAAP     Adjustments (2)     Pro Forma (3)  

Gross Margin

            

Integrated care management (4)

   $ 4,615     $ —       $ 4,615     $ 9,722     $ —       $ 9,722  

Global telehealth (5)

   $ 2,634     $ 1,903     $ 4,537     $ 2,933     $ 6,097     $ 9,030  

Digital pharmacy (6)

   $ 1,982     $ 750     $ 2,732     $ 1,982     $ 3,322     $ 5,304  

Behavioral health (7)

   $ 2,370     $ —       $ 2,370     $ 3,645     $ (165 )    $ 3,480  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 11,601     $ 2,653     $ 14,254     $ 18,282     $ 9,254     $ 27,536  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended June 30, 2021     Six Months Ended June 30, 2021  
     GAAP     Adjustments (2)     Pro Forma (3)     GAAP     Adjustments (2)     Pro Forma (3)  

Gross margin %:

            

Integrated care management (4)

     40.9 %      n/a       40.9 %      55.3 %      n/a       55.3 % 

Global telehealth (5)

     37.8 %      35.3 %      36.7 %      38.8 %      39.1 %      39.0 % 

Digital pharmacy (6)

     37.4 %      39.6 %      38.0 %      37.4 %      37.2 %      37.3 % 

Behavioral health (7)

     28.4 %      n/a       28.4 %      25.5 %      -29.5 %      23.5 % 

Total

     36.4 %      36.4 %      36.4 %      40.9 %      36.9 %      39.5 % 
     As of June 30, 2021                                
     GAAP                                

Total assets

            

Integrated care management (4)

   $ 195,975            

Global telehealth (5)

   $ 349,237            

Digital pharmacy (6)

   $ 184,307            

Behavioral health (7)

   $ 83,414            

Corporate (8)

   $ 85,120            
  

 

 

           

Total

   $ 898,053            
  

 

 

           

 

(1)

See Non-GAAP Financial Information section for definitions of our non-GAAP financial measures.

UPHEALTH, INC.

SEGMENT INFORMATION AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)

(in thousands, unaudited)

 

(2)

Amounts reflect operating activity of UpHealth and subsidiaries during the period prior to each subsidiary’s’ acquisition date, if acquired during the period.

(3)

Amounts reflect operating activity of UpHealth and subsidiaries during the period, as if acquired at the beginning of the period.

Segment Information

Our business is organized into five reportable segments:

Integrated Care Management—through our Thrasys subsidiary;

Global Telehealth—through our Glocal and Cloudbreak subsidiaries;

Digital Pharmacy—through our Innovations subsidiary;

Behavioral Health—through our BHS and TTC subsidiaries; and

Corporate—through UpHealth and our UpHealth Holdings subsidiary.

The reportable segments are consistent with how management views our services and products and the financial information reviewed by the chief operating decision makers. We manage our businesses as components of an enterprise for which separate information is available and is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assess performance.

 

(4)

In the Integrated Care Management segment, we provide our customers with an advanced, comprehensive, and extensible technology platform, marketed under the umbrella “SyntraNetTM” to manage health, quality of care, and costs, especially for individuals with complex medical, behavioral health, and social needs.

(5)

In the Global Telehealth segment, we provide technology and process-based healthcare platforms providing our customers comprehensive primary care, specialty consultations, and translation services, through telemedicine, Digital Dispensaries, and technology-based hospital centers.

(6)

In the Digital Pharmacy segment, we provide custom compounded medications for the unique needs of every patient and prescriber. We are a full-service pharmacy filling prescriptions from our inventory of compounded medications, as well as drugs purchased from manufacturers.

(7)

In the Behavioral Health segment, we provide inpatient and outpatient substance abuse and mental health treatment services for individuals with drug and alcohol addiction and other behavioral health issues. We offer a complete continuum of care from detoxification services, residential care, partial hospitalization programs, and intensive outpatient and outpatient programs.

(8)

In the Corporate segment, we perform executive, administrative, finance, human resources, legal, and information technology services for UpHealth, Inc. and for its subsidiaries, managed in a corporate shared services environment. Since they are not the responsibility of segment operating management, they are not allocated to the operating segments and instead reported within Corporate.